Risk management is the application of appropriate tools and procedures to contain risk within acceptable limits. In this paper, the authors apply risk management to software development that uses extreme programming approach. A risk tool is designed and developed using MS Excel. The tool is simple to use and would help risk analysis of the twelve practices of extreme programming. The tool has been used and experimented with. Information such as
project budget , risk management budget, cost of controls, SLE, ARO have been entered into the tool to analyze the priority practices in order to decide which practice must be
dealt with first.